Markets opened on a subdued note due to lack of any strong trigger and weak global cues. The S&P CNX Nifty was up 2 points, at 5,501 and the Sensex was up 23 points, at 18,365.
Foreign Institutional Investors have turned Jittery as they have been net sellers of $1.6 billion (Rs 7220 crore) since March 25 according to the Bombay Stock Exchnage due to high inflation and hawkish stance of the central Bank. Technical analysts expect further downside for the markets as the Nifty has formed a bear flag pattern on technical charts resembling an inverted flag on a pole, the decline has strong volume and consistent downward price movement.
Edelweiss in the morning note said, “The bear flag continuation pattern is still in play as we look for an eventual break down of last week’s range trade. The momentum oscillators have again rolled bearish.” Edelweiss expects markets to take support at 5370-5350 levels.
Across Asia, markets were trading mostly lower amid signs of a slowdown in the United States which dragged the global stocks and oil prices lower.
Japan's benchmark Nikkei average was down 0.4% over concerns of compensation pay out at the nuclear power plant and losses in auto shares. Hong Kong's Hang Seng fell 0.4% led by losses in resource shares. China's Shanghai Composite index slipped 0.2%.
Among individual stocks ONGC fell 4% on concerns that upstream oil companies may have to bear the subsidy burden of Rs 30,000 crore according to television reports as government increased upstream subsidy sharing to to 38.5% of total burden for FY11 which may affect the profitability and plans of Follow on public offer. Also State Bank of India was on investors’ radar ahead of quarterly results, according to Reuters poll profit is expected to rise 63% y-o-y.
Monday, May 16, 2011
Foreign investment in MFs likely to face cap
MUMBAI: India's policy-makers are considering putting a cap or ceiling of between $5 and $10 billion on investment by foreign investors in Indian mutual funds to possibly limit the impact of any surge in inflows once this route is opened up soon.
The government had announced in this year's budget that it would allow overseas individuals to invest in equity schemes of Indian mutual funds as part of a move to diversify the class of foreign investors in the local equities market. Securities market regulator, Sebi, the Reserve Bank of India and the finance ministry have been in talks to operationalise a scheme for this and the central bank has suggested that as a prudential measure, a ceiling on investment by these foreign investors should be fixed to start with, two senior officials ent said.
The way the scheme will operate is that a foreign investor will have to open a dematerialisation or paperless trading account and a bank account here for which the Know Your Customer norms will be done by a local bank or intermediary registered with regulators here. Once this is done, foreign investors can buy into over 400 equity schemes.
Foreign funds and non-resident Indians who are registered with Sebi are allowed to invest in equity mutual funds but there has hardly been any investment except in select exchange traded funds.
In the Indian equities market, there are no fetters on foreign funds in terms of investment except a limit of 10% on a single foreign investor buying into a company's capital. For investments in Indian corporate and government debt too, there are restrictions. "We need a framework for both capital inflows and outflows and we thought that it would not only be prudent but also provide clarity upfront if we say that there would be a ceiling on investment," a senior official said. This official declined to be identified.
What could be of concern to the central bank is a possible surge in volatile capital inflows later which could put pressure on currency and inflation management. When foreign capital flows are robust, the Reserve Bank will have to mop up these flows which in turn results in boosting liquidity in the local markets. To check this excess liquidity, the RBI sells securities or bonds to banks and institutions to drain it out - a process known as sterilisation. This however comes at a cost to the government - which has to service the interest cost on these bonds.
Right now, such worries are overblown because excess inflows if any are being used to finance India's current account deficit - the excess of goods and services imports over exports. In FY11, foreign portfolio investors bought stocks and bonds of over $31 billion. In the year to date, foreign funds have been net sellers at $490 million. Sebi has worked out a scheme for foreign investors to buy into local mutual funds which is being vetted by the government and the Reserve Bank of India. One of the challenges in getting the scheme going is in ensuring KYC or due diligence of the foreign investor. Only some of the depository participants such as banks which have a wide global network may be in a position to carry this out. Indian institutions may either to forge tie-ups with foreign partners or open offices abroad if they want to woo greater foreign portfolio investment. If the scheme takes off as policy makers are hoping it would - it will boost India's mutual fund industry which manages assets of over Rs 7,00,000 crore and is now weighed down by the problem of lack of interest on the part of distributors to sell mutual funds. They have been loath to push mutual fund products after the regulator banned fund houses from charging investors an entry fees or load.
The government had announced in this year's budget that it would allow overseas individuals to invest in equity schemes of Indian mutual funds as part of a move to diversify the class of foreign investors in the local equities market. Securities market regulator, Sebi, the Reserve Bank of India and the finance ministry have been in talks to operationalise a scheme for this and the central bank has suggested that as a prudential measure, a ceiling on investment by these foreign investors should be fixed to start with, two senior officials ent said.
The way the scheme will operate is that a foreign investor will have to open a dematerialisation or paperless trading account and a bank account here for which the Know Your Customer norms will be done by a local bank or intermediary registered with regulators here. Once this is done, foreign investors can buy into over 400 equity schemes.
Foreign funds and non-resident Indians who are registered with Sebi are allowed to invest in equity mutual funds but there has hardly been any investment except in select exchange traded funds.
In the Indian equities market, there are no fetters on foreign funds in terms of investment except a limit of 10% on a single foreign investor buying into a company's capital. For investments in Indian corporate and government debt too, there are restrictions. "We need a framework for both capital inflows and outflows and we thought that it would not only be prudent but also provide clarity upfront if we say that there would be a ceiling on investment," a senior official said. This official declined to be identified.
What could be of concern to the central bank is a possible surge in volatile capital inflows later which could put pressure on currency and inflation management. When foreign capital flows are robust, the Reserve Bank will have to mop up these flows which in turn results in boosting liquidity in the local markets. To check this excess liquidity, the RBI sells securities or bonds to banks and institutions to drain it out - a process known as sterilisation. This however comes at a cost to the government - which has to service the interest cost on these bonds.
Right now, such worries are overblown because excess inflows if any are being used to finance India's current account deficit - the excess of goods and services imports over exports. In FY11, foreign portfolio investors bought stocks and bonds of over $31 billion. In the year to date, foreign funds have been net sellers at $490 million. Sebi has worked out a scheme for foreign investors to buy into local mutual funds which is being vetted by the government and the Reserve Bank of India. One of the challenges in getting the scheme going is in ensuring KYC or due diligence of the foreign investor. Only some of the depository participants such as banks which have a wide global network may be in a position to carry this out. Indian institutions may either to forge tie-ups with foreign partners or open offices abroad if they want to woo greater foreign portfolio investment. If the scheme takes off as policy makers are hoping it would - it will boost India's mutual fund industry which manages assets of over Rs 7,00,000 crore and is now weighed down by the problem of lack of interest on the part of distributors to sell mutual funds. They have been loath to push mutual fund products after the regulator banned fund houses from charging investors an entry fees or load.
IBM, HP opt out of 2,000-crore UIDAI bid
NEW DELHI: Two of the world's largest technology companies - IBM and HP - on Monday opted out from bidding for the 2,000-crore outsourcing contract to manage the world's biggest citizen identity database, people familiar with the development said.
The Unique Identity Development Authority of India, or UIDAI, headed by Infosys founder Nandan Nilekani , had asked vendors to submit their proposals for the contract by Monday evening. After IBM and HP dropped out from the race, the remaining five - Accenture , Wipro, TCS , HCL Infosystems and Mahindra Satyam - will go to the next stage and begin their negotiations with the UID officials.
"They (IBM and HP) are not interested," confirmed an official familiar with the bidding.
In one of the biggest outsourcing contracts to be awarded this year by any Indian government department, the selected vendor will manage all IT and the national repository which will contain data of all Indian citizens.
Executives at vendors who decided not to bid said it was a decision by Global HQs not to participate in bidding.
"As far as I know, we have not submitted any bids, the conditions did not match our processes," said another person who requested anonymity because he is not authorised to speak with media.
The tech majors had earlier complained to Unique ID Authority of being biased towards products of certain vendors (EMC Corp and Cisco). The authority postponed the bidding last month and made changes to the tender specifications after ET reported about a fiery meeting in the capital with the bidders.
The final five vendors submitted bids on Monday at UIDAI headquarters at Jeevan Bharti Building at Connaught Place in huge cartons. The timely selection of the IT vendor is critical to the success and implementation of the UIDAI project, which aims at giving 600 million Unique ID numbers by 2014.
"We decided to quit the bidding process on the request of our global headquarters. Things had become pretty hostile between us and the authority over the weeks," said an official at one the US-based tech majors which opted out. "Things had become pretty bad for us after we complained," said another top level official declining further comment.
Spokespersons of both IBM and HP declined to offer reasons why the companies opted out from participating in one of the most prestigious and large projects in India, even after submitting expressions of interest. Both companies got selected and participated in all pre-bids as well.
Another executive said his company decided to opt out because the chances to win the project were not as bright.
"It costs us over a million dollars to put in such a large bid as teams fly down from across the globe over many months. It's best we concentrate on projects where chances of winning are higher," he added.
UIDAI officials say it's up to the companies to bid. "Some who opted out have earlier participated as equipment vendors. We will take about three months to decide on the winner from the bidders," said a UIDAI spokesperson. The selected vendor will manage all IT infrastructure for the project. Only large firms with at least 4,000 people and sales of 6,000 crore in the last three years were allowed to bid.
The Unique Identity Development Authority of India, or UIDAI, headed by Infosys founder Nandan Nilekani , had asked vendors to submit their proposals for the contract by Monday evening. After IBM and HP dropped out from the race, the remaining five - Accenture , Wipro, TCS , HCL Infosystems and Mahindra Satyam - will go to the next stage and begin their negotiations with the UID officials.
"They (IBM and HP) are not interested," confirmed an official familiar with the bidding.
In one of the biggest outsourcing contracts to be awarded this year by any Indian government department, the selected vendor will manage all IT and the national repository which will contain data of all Indian citizens.
Executives at vendors who decided not to bid said it was a decision by Global HQs not to participate in bidding.
"As far as I know, we have not submitted any bids, the conditions did not match our processes," said another person who requested anonymity because he is not authorised to speak with media.
The tech majors had earlier complained to Unique ID Authority of being biased towards products of certain vendors (EMC Corp and Cisco). The authority postponed the bidding last month and made changes to the tender specifications after ET reported about a fiery meeting in the capital with the bidders.
The final five vendors submitted bids on Monday at UIDAI headquarters at Jeevan Bharti Building at Connaught Place in huge cartons. The timely selection of the IT vendor is critical to the success and implementation of the UIDAI project, which aims at giving 600 million Unique ID numbers by 2014.
"We decided to quit the bidding process on the request of our global headquarters. Things had become pretty hostile between us and the authority over the weeks," said an official at one the US-based tech majors which opted out. "Things had become pretty bad for us after we complained," said another top level official declining further comment.
Spokespersons of both IBM and HP declined to offer reasons why the companies opted out from participating in one of the most prestigious and large projects in India, even after submitting expressions of interest. Both companies got selected and participated in all pre-bids as well.
Another executive said his company decided to opt out because the chances to win the project were not as bright.
"It costs us over a million dollars to put in such a large bid as teams fly down from across the globe over many months. It's best we concentrate on projects where chances of winning are higher," he added.
UIDAI officials say it's up to the companies to bid. "Some who opted out have earlier participated as equipment vendors. We will take about three months to decide on the winner from the bidders," said a UIDAI spokesperson. The selected vendor will manage all IT infrastructure for the project. Only large firms with at least 4,000 people and sales of 6,000 crore in the last three years were allowed to bid.
Free trade pact with EU likely to include auto
CHENNAI: India's proposed free trade agreement (FTA) with the European Union could include tariff reduction on import of vehicles as well as automotive components. If it does, it will be a first since India's FTAs with other auto hubs like Japan, Korea and Thailand have so far left out completely-built vehicles from the areas covered by the FTA. The possibility of fully-built vehicles being included in the FTA with the EU – home to auto majors like Volkswagen, BMW, Mercedes Benz, Fiat and Renault – is causing considerable heartburn in the auto industry.
The industry apex body SIAM (Society of Indian Automobile Manufacturers) had protested against the inclusion of fully-built vehicles under the EU FTA earlier this year. The commerce ministry had, back then, asked for their recommendation on the subject. SIAM had said it's against any exception to the rule that has so far applied to other FTAs including the Asean, Korea and Japan. All of them lead to some tariff reduction on components but did not touch fullybuilt up vehicles. SIAM wanted status quo to be maintained in the case of the EU FTA as well.
Since then, though, the industry has not been kept in the loop about the details of the negotiations or the areas that are likely to be covered. The ministry and SIAM had a public face-off before that – the government felt the auto industry enjoyed undue tariff protection unlike other sectors while SIAM felt the EU FTA would seriously impact both employment and investment in the sector.
The EU FTA has now entered the final phase of negotiations and the draft will likely be announced shortly. Once both the Indian commerce minister and EU trade commissioner announce their intent to sign, the FTA will be formally implemented next year.
"Apart from offering the EU undue tariff advantage in automobiles over Japan, Asean and Korea, it will also mean cheap import of big cars which will run on subsidised diesel at a time when big cars in India are being taxed higher and there is also talk of a diesel tax on big SUVs and luxury vehicles," said a Delhi-based auto CEO.
Currently import of fully-built up cars attracts 110% duty though the actual import duty is 60%. The rest of the taxes are also applicable on locally assembled vehicles. European car majors such as Volkswagen, Mercedes Benz, BMW, Renault and Fiat have made substantial investments in India. VW, for instance, has pumped in Rs 3,800 crore in its new plant in Chakan, Maharashtra; Mercedes Benz and Daimler India are together pumping in around Rs 5,000 crore into the Indian market in creating a car assembly line and a truck manufacturing plant.
The industry apex body SIAM (Society of Indian Automobile Manufacturers) had protested against the inclusion of fully-built vehicles under the EU FTA earlier this year. The commerce ministry had, back then, asked for their recommendation on the subject. SIAM had said it's against any exception to the rule that has so far applied to other FTAs including the Asean, Korea and Japan. All of them lead to some tariff reduction on components but did not touch fullybuilt up vehicles. SIAM wanted status quo to be maintained in the case of the EU FTA as well.
Since then, though, the industry has not been kept in the loop about the details of the negotiations or the areas that are likely to be covered. The ministry and SIAM had a public face-off before that – the government felt the auto industry enjoyed undue tariff protection unlike other sectors while SIAM felt the EU FTA would seriously impact both employment and investment in the sector.
The EU FTA has now entered the final phase of negotiations and the draft will likely be announced shortly. Once both the Indian commerce minister and EU trade commissioner announce their intent to sign, the FTA will be formally implemented next year.
"Apart from offering the EU undue tariff advantage in automobiles over Japan, Asean and Korea, it will also mean cheap import of big cars which will run on subsidised diesel at a time when big cars in India are being taxed higher and there is also talk of a diesel tax on big SUVs and luxury vehicles," said a Delhi-based auto CEO.
Currently import of fully-built up cars attracts 110% duty though the actual import duty is 60%. The rest of the taxes are also applicable on locally assembled vehicles. European car majors such as Volkswagen, Mercedes Benz, BMW, Renault and Fiat have made substantial investments in India. VW, for instance, has pumped in Rs 3,800 crore in its new plant in Chakan, Maharashtra; Mercedes Benz and Daimler India are together pumping in around Rs 5,000 crore into the Indian market in creating a car assembly line and a truck manufacturing plant.
Sunday, May 15, 2011
Markets likely to be range-bound this week: Experts
The stock market is likely to be range-bound this week as investors weigh positive cues like declining food inflation and better-than-expected industrial growth against the recent hike in key short-term interest rates, say experts. Market players said the short-term momentum is clearly negative for
the market, as high interest rates are a significant damper for the overall sentiment.
"We have to wait and watch for commodities to decline and stabilise, IIP to rise and stabilise and inflation or interest rates pressure to ease and then markets can become more positive in the next 2-3 months," Mape Securities Senior Director (Research) Kislay Kanth said.
The market mood is likely to be vitiated by the government's decision to hike petrol prices by Rs 5 in New Delhi. Analysts apprehended that if petrol prices went up by Rs 1-2 per litre, the market would discount it, but if they went up by more than Rs 3-4 a litre, the market will go into the negative zone.
It was a lacklustre week for the market despite positive domestic economic indicators. In the week gone by, the BSE benchmark Sensex went up marginally by 0.06% to settle at 18,531.28 in the previous trading session.
"Going forward, the market will take cues from any sort of positive overtures from the Centre on the policy front. The market will welcome any further moderation in crude oil and other global commodities. Watch out for the April inflation data on Monday," IIFL Head of Research (India Private Clients) Amar Ambani said.
Analysts said the favourable election outcome would give the Congress-led coalition more leverage to push through long-pending reforms in the financial sector.
"The sentiment got a boost, as with the ouster of the scam-tainted DMK in Tamil Nadu, UPA-II could just be able to pursue long-pending reforms and will be able to deal with the 2G scam culprits much more effectively," Ambani said.
Food inflation dropped to 7.7% for the week ended April 30, the lowest level in 18 months. India's exports grew by an annualised 34.4% to USD 23.9 billion in April.
Factory output in March, as measured in terms of the Index of Industrial Production (IIP), slowed to 7.3%, compared to 15.5% expansion in the same month a year ago.
Experts said the IIP growth rate of 7.3% was higher than expected and will likely generate a positive response. The growth rate of 7.8% for FY'11 is less than FY'10, but is still good, given that IIP rates in the last 4-5 months were very volatile, they added.
the market, as high interest rates are a significant damper for the overall sentiment.
"We have to wait and watch for commodities to decline and stabilise, IIP to rise and stabilise and inflation or interest rates pressure to ease and then markets can become more positive in the next 2-3 months," Mape Securities Senior Director (Research) Kislay Kanth said.
The market mood is likely to be vitiated by the government's decision to hike petrol prices by Rs 5 in New Delhi. Analysts apprehended that if petrol prices went up by Rs 1-2 per litre, the market would discount it, but if they went up by more than Rs 3-4 a litre, the market will go into the negative zone.
It was a lacklustre week for the market despite positive domestic economic indicators. In the week gone by, the BSE benchmark Sensex went up marginally by 0.06% to settle at 18,531.28 in the previous trading session.
"Going forward, the market will take cues from any sort of positive overtures from the Centre on the policy front. The market will welcome any further moderation in crude oil and other global commodities. Watch out for the April inflation data on Monday," IIFL Head of Research (India Private Clients) Amar Ambani said.
Analysts said the favourable election outcome would give the Congress-led coalition more leverage to push through long-pending reforms in the financial sector.
"The sentiment got a boost, as with the ouster of the scam-tainted DMK in Tamil Nadu, UPA-II could just be able to pursue long-pending reforms and will be able to deal with the 2G scam culprits much more effectively," Ambani said.
Food inflation dropped to 7.7% for the week ended April 30, the lowest level in 18 months. India's exports grew by an annualised 34.4% to USD 23.9 billion in April.
Factory output in March, as measured in terms of the Index of Industrial Production (IIP), slowed to 7.3%, compared to 15.5% expansion in the same month a year ago.
Experts said the IIP growth rate of 7.3% was higher than expected and will likely generate a positive response. The growth rate of 7.8% for FY'11 is less than FY'10, but is still good, given that IIP rates in the last 4-5 months were very volatile, they added.
Fresh blood at heart of Wipro’s revamp
Wipro had become too bloated and bureaucratic to compete effectively, admits Azim Premji, the chairman and majority owner of India’s third-largest IT outsourcing company.
So, in far-reaching changes to Wipro’s culture, thousands of new graduates are being hired to help with the reinvigoration process.
“I think where it went wrong was that we over-bureaucratised the organisation,” Mr Premji tells the Financial Times during a visit to London. “We created too many layers. I think we have enough people in middle management and supervisory levels. We don’t want to be top-heavy.
“What we are doing is recruiting 70 per cent of our people from campus now. Whereas last year, we recruited just 45 per cent from campus,” he says.
But other changes to the structure at Wipro are a touchy subject with Mr Premji, who has led the group for the last 45 years.
He wants to make it clear that the sudden departure in January of Girish Paranjpe and Suresh Vaswani, who were joint chief executives of the company, was in no way an “ousting”.
Nor does he believe that it was a mistake for Wipro to have tried out an unusual structure of two chief executives. “It was a decision we made three years ago when the world was facing terrible impending risk of recession. We thought we required the power of two, irrespective of the weaknesses of the power of two.”
The appointment of T.K. Kurien as the company’s new, sole chief executive had been planned for some time, Mr Premji says, but he admits the changeover was brought forward by Wipro’s disappointing sales performance last year.
“The organisation was losing momentum, so we reacted. We thought that a change from a joint CEO structure to a single CEO structure was critical.”
Wipro saw just 6 per cent revenue growth in 2010 compared with 40 per cent growth for rival Cognizant and 24.3 per cent for Tata Consultancy Services, another competitor.
Mr Kurien, a long-term Wipro employee, who was previously head of the company’s eco-energy unit, represents a younger, more driven management style.
The 52-year-old is known within Wipro for being energetic and straight-talking and for having a ruthless attention to detail.
At one of his first staff meetings he gave prizes to the employees asking him the toughest questions.
Mr Premji, who owns 74 per cent of Wipro, says Mr Kurien offers “extremely strong execution capability blended with a strong strategic focus. And he is terrific with customers”.
Critics of the Bangalore-based company say it has been unable to respond quickly enough to changing demands in the wake of the global financial crisis.
Sudin Apte, principal analyst at Offshore Insight, says: “There is a perception among clients that Wipro isn’t able to deliver what they need, which is a more integrated business and technology solution rather than just providing a software and some back-office . . . they want added-value services.”
Mr Premji concedes some ground to the critics, saying: “Where we have really fallen behind is our ability to create business with customers. We have always been in the past too much in a reactive model. We have not created business like an Accenture or IBM does. Customers want to be coached and to have us discuss with them what more we can do for their business.”
Wipro is a family business and 67-year-old Mr Premji was forced to take over the running of the company in 1966, interrupting his studies in electrical engineering at Stanford university, following the sudden death of his father.
He has never been hesitant to make changes at the group, having transformed the business from a maker of hydrogenated vegetable oils to one of the leaders in the Indian IT industry.
Mr Premji says he expects the world economy to remain mixed over the next few years.
However, he says that protectionist sentiment in the US, which has dogged the Indian outsourcing companies’ efforts to expand in that market, was likely to soften as the US economy went into recovery.
Mr Premji has recently been withdrawing – just a touch – from the business. His role as chairman is mainly strategic these days and his work for the educational charity he has founded in India is becoming more important.
In December, Mr Premji, whose personal fortune is estimated at $16.8bn, donated Wipro shares worth $2bn to his own foundation to fund rural education – one of the largest charitable donations in Indian history. He was nominated as one of the world’s 100 most influential people by Time magazine, including a citation from Bill Gates for his charity work.
He continues to keep a close eye, however, on Mr Kurien’s progress. The new chief has tough targets to reach. “The most important thing is restoring employee morale, customer satisfaction and getting the sales engine working again. He has to do it,” Mr Premji says. “The stakes are so large, you can’t carry dead wood.”
So, in far-reaching changes to Wipro’s culture, thousands of new graduates are being hired to help with the reinvigoration process.
“I think where it went wrong was that we over-bureaucratised the organisation,” Mr Premji tells the Financial Times during a visit to London. “We created too many layers. I think we have enough people in middle management and supervisory levels. We don’t want to be top-heavy.
“What we are doing is recruiting 70 per cent of our people from campus now. Whereas last year, we recruited just 45 per cent from campus,” he says.
But other changes to the structure at Wipro are a touchy subject with Mr Premji, who has led the group for the last 45 years.
He wants to make it clear that the sudden departure in January of Girish Paranjpe and Suresh Vaswani, who were joint chief executives of the company, was in no way an “ousting”.
Nor does he believe that it was a mistake for Wipro to have tried out an unusual structure of two chief executives. “It was a decision we made three years ago when the world was facing terrible impending risk of recession. We thought we required the power of two, irrespective of the weaknesses of the power of two.”
The appointment of T.K. Kurien as the company’s new, sole chief executive had been planned for some time, Mr Premji says, but he admits the changeover was brought forward by Wipro’s disappointing sales performance last year.
“The organisation was losing momentum, so we reacted. We thought that a change from a joint CEO structure to a single CEO structure was critical.”
Wipro saw just 6 per cent revenue growth in 2010 compared with 40 per cent growth for rival Cognizant and 24.3 per cent for Tata Consultancy Services, another competitor.
Mr Kurien, a long-term Wipro employee, who was previously head of the company’s eco-energy unit, represents a younger, more driven management style.
The 52-year-old is known within Wipro for being energetic and straight-talking and for having a ruthless attention to detail.
At one of his first staff meetings he gave prizes to the employees asking him the toughest questions.
Mr Premji, who owns 74 per cent of Wipro, says Mr Kurien offers “extremely strong execution capability blended with a strong strategic focus. And he is terrific with customers”.
Critics of the Bangalore-based company say it has been unable to respond quickly enough to changing demands in the wake of the global financial crisis.
Sudin Apte, principal analyst at Offshore Insight, says: “There is a perception among clients that Wipro isn’t able to deliver what they need, which is a more integrated business and technology solution rather than just providing a software and some back-office . . . they want added-value services.”
Mr Premji concedes some ground to the critics, saying: “Where we have really fallen behind is our ability to create business with customers. We have always been in the past too much in a reactive model. We have not created business like an Accenture or IBM does. Customers want to be coached and to have us discuss with them what more we can do for their business.”
Wipro is a family business and 67-year-old Mr Premji was forced to take over the running of the company in 1966, interrupting his studies in electrical engineering at Stanford university, following the sudden death of his father.
He has never been hesitant to make changes at the group, having transformed the business from a maker of hydrogenated vegetable oils to one of the leaders in the Indian IT industry.
Mr Premji says he expects the world economy to remain mixed over the next few years.
However, he says that protectionist sentiment in the US, which has dogged the Indian outsourcing companies’ efforts to expand in that market, was likely to soften as the US economy went into recovery.
Mr Premji has recently been withdrawing – just a touch – from the business. His role as chairman is mainly strategic these days and his work for the educational charity he has founded in India is becoming more important.
In December, Mr Premji, whose personal fortune is estimated at $16.8bn, donated Wipro shares worth $2bn to his own foundation to fund rural education – one of the largest charitable donations in Indian history. He was nominated as one of the world’s 100 most influential people by Time magazine, including a citation from Bill Gates for his charity work.
He continues to keep a close eye, however, on Mr Kurien’s progress. The new chief has tough targets to reach. “The most important thing is restoring employee morale, customer satisfaction and getting the sales engine working again. He has to do it,” Mr Premji says. “The stakes are so large, you can’t carry dead wood.”
Equity folios plunge in April
Fresh investor money coming in but less of it going into equity category.
The Indian mutual fund sector lost a little over 400,000 equity folios in April, one of the sharpest such declines in a single month.
After successfully applying brakes on the pace of loss of equity folios in the second half of the previous financial year, the MF industry is again in trouble on the growing of the equity base.
The equity folio loss in April was a little less than one-fourth of what the industry lost in all of 2010-11. In FY11, the fund industry saw an erosion of 1.8 million equity folios. About Rs 1,400 crore went out of MF equity schemes.
The Securities and Exchange Board of India (Sebi) says the number of equity folios (including equity-linked saving schemes or ELSS) stood at 38.88 million as on April 30, against 39.29 million at the end of the previous month.
STEEP FALL
Category-wise change in folios
Category Number in April Change*
Equity 3,05,60,596 - 2,78,240
ELSS 83,277,13 - 1,23,740
ETFs 4,33,356 10,555
Income 47,19,763 + 1,92,328
Industry’s overall folios 4,70,18,486 - 2,14,776
*with respect to March figures Source: Securities and Exchange Board of India
The hit on the pure equity category was severe, as it declined by 2,78,000; ELSS folios shrank by 1,23,000.
WORRIES
Karan Datta, national sales head at Axis Mutual Fund, says, “The situation is not good. It is increasingly getting difficult to attract customers in the equity segment. However, it is not that fresh flow is not coming to the industry. The majority of the fresh money is getting diverted to gold and income funds, particularly the fixed maturity plans.”
More, with underperforming Indian equity markets, fund managers have raised concern over how the scenario would turn around in the coming months.
According to Navneet Munot, chief investment officer at SBI Mutual Fund, “Going forward, it would be a challenge to maintain flows in the equity segment, given the current volatility.” Vetri Subramaniam, equity head at Religare Mutual Fund, agrees. He says, “It is likely that inflows will be under pressure in a volatile market.”
This loss of folios is also in the background of the shallow penetration of mutual fund products among the country’s population — less than five per cent. Poor penetration and a majority of investment coming from only the top 10 cities has been an issue for the industry. Though investor awareness programmes and expansion in terms of reach to tier-I & II cities are on, it has not yet reflected in the industry’s assets and number of investors.
The new regime at Sebi under U K Sinha is already contemplating changes to bring relief for the industry. Sector experts say unless distributors are incentivised properly, it would remain an uphill task to increase penetration of MF products.
The overall industry’s folios also shrank in April by close to 200,000 folios as compared with 47.23 million as on March 31.
Income schemes saw the top growth in folio addition, as it increased 4.2 per cent to 4.71 million in April from 4.52 million at the end of March.
Exchange traded funds continued their momentum and the month saw a rise of 2.5 per cent in their folios, while the investor base of gold exchange traded funds was up three per cent during the month.
The Indian mutual fund sector lost a little over 400,000 equity folios in April, one of the sharpest such declines in a single month.
After successfully applying brakes on the pace of loss of equity folios in the second half of the previous financial year, the MF industry is again in trouble on the growing of the equity base.
The equity folio loss in April was a little less than one-fourth of what the industry lost in all of 2010-11. In FY11, the fund industry saw an erosion of 1.8 million equity folios. About Rs 1,400 crore went out of MF equity schemes.
The Securities and Exchange Board of India (Sebi) says the number of equity folios (including equity-linked saving schemes or ELSS) stood at 38.88 million as on April 30, against 39.29 million at the end of the previous month.
STEEP FALL
Category-wise change in folios
Category Number in April Change*
Equity 3,05,60,596 - 2,78,240
ELSS 83,277,13 - 1,23,740
ETFs 4,33,356 10,555
Income 47,19,763 + 1,92,328
Industry’s overall folios 4,70,18,486 - 2,14,776
*with respect to March figures Source: Securities and Exchange Board of India
The hit on the pure equity category was severe, as it declined by 2,78,000; ELSS folios shrank by 1,23,000.
WORRIES
Karan Datta, national sales head at Axis Mutual Fund, says, “The situation is not good. It is increasingly getting difficult to attract customers in the equity segment. However, it is not that fresh flow is not coming to the industry. The majority of the fresh money is getting diverted to gold and income funds, particularly the fixed maturity plans.”
More, with underperforming Indian equity markets, fund managers have raised concern over how the scenario would turn around in the coming months.
According to Navneet Munot, chief investment officer at SBI Mutual Fund, “Going forward, it would be a challenge to maintain flows in the equity segment, given the current volatility.” Vetri Subramaniam, equity head at Religare Mutual Fund, agrees. He says, “It is likely that inflows will be under pressure in a volatile market.”
This loss of folios is also in the background of the shallow penetration of mutual fund products among the country’s population — less than five per cent. Poor penetration and a majority of investment coming from only the top 10 cities has been an issue for the industry. Though investor awareness programmes and expansion in terms of reach to tier-I & II cities are on, it has not yet reflected in the industry’s assets and number of investors.
The new regime at Sebi under U K Sinha is already contemplating changes to bring relief for the industry. Sector experts say unless distributors are incentivised properly, it would remain an uphill task to increase penetration of MF products.
The overall industry’s folios also shrank in April by close to 200,000 folios as compared with 47.23 million as on March 31.
Income schemes saw the top growth in folio addition, as it increased 4.2 per cent to 4.71 million in April from 4.52 million at the end of March.
Exchange traded funds continued their momentum and the month saw a rise of 2.5 per cent in their folios, while the investor base of gold exchange traded funds was up three per cent during the month.
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